INCOME TAX ACT, 1961

Section 4

Income - Capital or Revenue receipt - Grant received towards purchses of buses -

Assessee-company received grant for non-operational purposes such as for purchases of buses, etc. AO required assessee to show-cause as to why the amount of grant received towards purchses of buses should not be brought to tax. Assessee submitted that the grant had been given specifically for purchase of fixed asset such as buses and same was not chargeable to tax, hence, the same had not been offered and credited in Profit and Loss Account. AO noticed that amount capitalized for purchase of buses out of capital grant so received from Central and State Government as shown in the books of accounts vis-a-vis utilised grant was lower by Rs. 4 crores, i.e., amount of utilized grant was higher by Rs. 4 crores and there was no corresponding increase in gross block of busess which had been capitalised in books of accounts. Accordinlgy, AO treated excess figure of Rs. 4 crores as revenue receipts from utilized grant appearing in balance sheet and made addition. Held: It is no doubt true that books of accounts of assessee company had been audited by a Chartered Accountant and also by CAG and there was no qualification or finding regarding misappropriation of grant. However, observation of AO regarding misapplication/ misappropriation of the grant was to be seen and appreciated in the limited context of examining actual utilization of capital grant received by assessee-company as to whether capital grant was utilized for the purpose of meeting specific end use for which capital grant had been granted or for meeting other operational expenditure. As adequate information was not available on record, AO was well within his right and jurisdiction to examine taxability thereof as to why same should not be treated as revenue receipt and brought to tax. Accordingly, matter was remanded back to AO to examine the same afresh after providing reasonable opportunity to assessee-company.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 40A(3)

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